Introduction

Reservation Price: maximum price a consumer is willing to pay for one unit of a good or service.

There is growing interest in RP out of three factors

• advent of e-commerce has paved the way for mass customization and personalized pricing, motivating individual-level RP measurement.
• marketing researchers are applying recent methodological advances in areas such as experimental economics and Bayesina statistics
• lack of consensus on the right way to measure (or even define) the RP, there are three definitions
  • “The minimum price at which a consumer would no longer purchase the product”
  • “The price at which a consumer is indifferent between buying and not buying the product”
  • “The price at or below which a consumer will demand one unit of the good”

Conceptualizing the RP as a range tied to the probability of purchase is supported by

• consumers’ preference uncertainty
• performance/quality uncertainty

Contribution: ICERANGE (incentive-compatible elicitation of range), tied to actual choice and motivated by Becker, DeGroot, and Marschak’s (BDM) point of purchase methodology. The range characterization retains the point measure as a special case.

Two studies: Belgian Chocolate